Economist Hyman Minsky had the rare ability to stand back from conventional wisdom and see beyond the current market’s irrationality. In the closing dinner remarks at the Levy Economic Institute’s Hyman P. Minsky Summer Seminar, Daniel Alpert, a founding member of the World Economic Roundtable and author of “The Age of Oversupply: Confronting the Greatest Challenge to the Global Economy,” took up the question “What would Minsky see today”?

The bursting of the housing bubble in 2008 plunged the U.S. economy into a serious crisis, leaving American households with a huge debt overhang and the economy with a large gap in output and employment. This report reviews the economy’s deleveraging and recovery experience more than five years after the crash. It explores the following questions:

How far has the economy come in the deleveraging process? Is private sector debt now at a sustainable level or do households and the financial sector continue to need to pay down debt?

Stock and bond market volatility combined with data disappointments have brought the 2014 global growth recovery story to a fork in the road. Either growth delivers or policy reversals will be required. For investors and policy makers alike the bar has been raised.

Mounting debt, diminishing net worth, insufficient savings, increasing foreclosures, rising unemployment—all painful financial side effects of what has been dubbed the worst economic recession in almost a century. These side effects have been relatively well-documented. Rates of bankruptcy rose 74% and home foreclosures soared as much as 358% in some areas. Unemployment rates peaked at a national average of about 10%, with much higher rates documented for African Americans and Latinos. High rates of unemployment meant potentially fewer wages for day-to-day household needs. With only small amounts of savings or net worth to tide them over, millions of households turned to public assistance programs to sustain themselves. These effects are likely to follow households—and the children who grew up in these households during the Great Recession—for years to come.

The “wealth effect” concept is remarkably simple: spending increases (decreases) as perceived wealth increases (decreases). When people perceive themselves to be richer, they spend more.

With the prices of stocks and bonds near all-time highs and home prices on the rebound, consumer spending should be on a tear. But it’s not -- much to the consternation of many economists, particularly those at the Federal Reserve. As a result, many believe the wealth effect is somehow broken.

It has been five years since the failure of Lehman Brothers and the beginning of the global financial crisis. Over this time, dozens of books have been written, thick Congressional reports have been issued, and even full-length documentaries have been filmed – all seeking to explain how the crisis happened.